$8M equity injection for Boatswain’s Beach

Cayman Turtle Farm Ltd/Boatswain’s Beach continues to experience financial difficulties as a result of its heavy debt load and the price sensitivity that exists in the cruise market, Finance Committee heard last week.

Minister for Tourism Charles Clifford explained that while high-end tours are being sold for Boatswain’s Beach, these are not subscribed at the same volumes as the low-cost old ‘Turtle Farm only’ tours that were historically sold.

The newly developed Boatswain’s Beach became fully operational on 1 March, 2007.

‘While the traditional Turtle Farm Tour is currently sold to 18 per cent of the cruise ship passengers, less than one per cent purchases the full Boatswain’s Beach experience,’ said Mr. Clifford.

‘The scale and complexity of the Boatswain’s Beach product as currently constituted requires high volumes at prices above the old Turtle Farm rates. Bridging this gap remains the challenge of the management team, board and government,’ he said.

The problem is inherited and that contracts should have been in place at the conception of the project to avoid the problem, he said.

The Minister reported that in March 2007, the Cayman Turtle Farm had two contracts, which had been agreed with the cruise lines. This number has now grown to six cruise lines.

It remains to be seen whether cruise passengers will purchase the premium experience in volumes needed to sustain the complex operations at Boatswain’s Beach.

The Minister said the change in price for the Boatswain’s Beach experience had a negative impact on the total market share for what the cruise market had long known and expected to pay for the Turtle Farm experience. With the introduction of a new and higher valued experience, the market declined to a low of six per cent in October 2007.

‘Management has regained market share and as of April 2008, this was 18 per cent. The marketing plan under review will continue the offensive on building the market share and ensuring that our product and our prices are relevant and attractive to the industry.’

A market analysis and feasibility study was recently completed by Deloitte (Cayman) and management has prepared a business plan that was to be presented to the board Tuesday for approval.

‘This business plan will allow us to bridge the gap between our operating and capital costs and our revenue lines,’ he said.

In the 2008/09 financial year the Government proposed to provide the facility an equity injection of just over CI$8 million. ‘More than half of this funding, approximately $5 million is earmarked to service Cayman Turtle Farm’s existing debt in a manner that does not further add to its debt position,’ said Mr. Clifford.

Along with servicing the debts, the $8 million equity injection will allow management to focus on the operating issues of the business in an effort to make the organisation a financial success, said the Minister.

He outlined what management has done to reduce operating expenses, including the recruitment of a Chief Financial Officer, re-establishing the accounts department and implementing strict financial controls over the last nine months.

Monthly operating losses have significantly decreased, said the Minister. At the start of the financial year in July 2007 the loss was CI$638,979 for that month compared to CI$312,983 in April 2008. ‘This clearly demonstrates the management’s actions are resulting in the desired improvements,’ said Mr. Clifford.

There were a number of challenges that occurred during this financial year, said Mr. Clifford. ‘These include the resignation of the managing director, the pressing issues of the effluent discharge permit, obtaining planning permits for the redeveloped property, a lack of senior financial and accounting staff, turtle breeding issues that threaten the future of our turtle farming, and negative cash flows.’

Mitigation strategies for the turtle programme involve a new research team consisting of partners from the Department of Environment, St. Matthews University, Cayman Turtle Farm, University of Exeter and University of Georgia.

Management has also developed an internal team and is in the process of finalising an agreement with a scientific body to address the effluent discharge issue which has pertained since the inception of the Turtle farm, now in its 40th year. ‘This environmental issue is decreased in comparison to prior years simply because the turtle herd population was dramatically decreased following Hurricane Michelle,’ the Minister said.

In respect to the outstanding planning permits for the redeveloped works, management has developed an action plan to complete the necessary works, which have been budgeted to cost $111,000 in 2008/09.

He also gave examples of key cost reductions at the facility: electricity in July 2007 was $230,000 when it was $160,000 in April 2008; water costs for July 2007 was $145,000 vs. April 2008 when it was $47,000; telephone costs for July 2007 was $48,000 versus $5,000 in April 2008.

It was noted that the resident population is positively contributing to the bottom line. In March 2007 the number of resident visitors to Boatswains Beach was 12 in comparison to 3,300 residents that visited in the month of March 2008.

Under questioning from Leader of the Opposition McKeeva Bush, Acting MD and COO Joey Ebanks said security has been upped at the park after an inventory count from this year showed around 355 turtles were missing from the herd. The stealing of turtles is something that has been going on there for many years, he said.

Mr. Bush also questioned Mr. Ebanks on a couple who had been fired from their posts at Boatswain’s Beach. Mr. Ebanks said one of the individuals was a senior member of the human resources department.

‘The decision I took was on actions I considered to be gross misconduct,’ he said and noted he did not want to comment further.

Mr. Bush said he hoped the decision was based on a standard policy and that what applies to one applies to all.